Political Science

Some of Trump’s first actions in office were two executive orders meant to crack down on illegal immigration by implementing tougher enforcement not just at the border but also within the country. This week The Washington Post reported that U.S. Immigration and Customs Enforcement had arrested 21,362 unauthorized immigrants across the country since Trump took office, a 32.6 percent increase from the previous year. (The data runs through mid-March.) At first glance these numbers might seem consistent with Trump’s promise to get “the bad ones” out of the country. But the Post also noted that of those arrested roughly a quarter, or 5,441, had no criminal record. That’s more than double the number of noncriminal arrests of undocumented immigrants during the same period in 2016. (Many of those arrested eventually will be deported, but because that process can be slow, changed enforcement patterns show up more quickly in arrest data.)

Look back a bit further, however, and the recent increase in enforcement looks less dramatic. The pace of arrests is running well behind the 29,238 made during the same period in 2014; that year, there were 7,483 noncriminal arrests through mid-March, which represented a similar share of the total as this year’s numbers.

That is from Ben Casselman, et.al. at 538.

That is the topic of my latest Bloomberg column, here is one bit:

One possibility is that a lot of talk about inequality gives the audience the impression that it is inevitable, and thereby renders potential remedies less urgent. Another speculation is that human beings are constantly evaluating the status of others. To the extent analysts reiterate that some group of citizens doesn’t have as much, maybe they’re actually reminding us that those citizens hold a lower social status. Perhaps subconsciously, we then respond by thinking those citizens deserve less, or by downgrading the urgency of their needs.

Another possibility is that talk about economic inequality increases political polarization, which lowers the chance of effective action. Or that criticizing American society may cause us to feel less virtuous, which in turn may cause us to act with less virtue. Perhaps if critics of inequality praised this nation more for what is has done to redress inequality, rather than criticizing it for the gaps, that might cement a self-image of Americans who are capable of tackling this problem, and thus spur interest in additional progress. That mechanism shouldn’t sound so strange to anyone who has tried to raise children.

When I bring up such points in dialogue, I’ve found that a lot of my fellow academicians retreat to the moral platitude that the “good guys” simply need to fight harder against the special interest groups. Maybe so, or maybe that response is just another way of digging in deeper to what so far has been a losing battle. The reality is that income inequality has gone up a great deal since the early 1980s, and we haven’t done so much to reverse the basic trend. The potentially egalitarian effects of  tax increases under the past two Democratic presidents and Obamacare have been outweighed by globalization, which benefits most those individuals who can access global markets, and by increases in the returns to highly skilled labor. The reality is that government expenditures have not become radically more poverty-reducing over the last few decades, although we do send more resources to the elderly.

Do read the whole thing, the various biting comments about other academics are in other parts of the piece.

Nigel, a loyal MR reader, asks me:

Is it possible for the US to abuse the dollar’s privileged position, and do you expect a monetary conference to take place in the future that would alter the post-Bretton Woods arrangement in ways less favorable to the US?

A good question, but at current margins I don’t see many directions for movement.  I don’t know whether such a monetary conference will take place, but it is unlikely to be a decisive event for shaping actual outcomes.  I see these as the relevant questions:

1. Will China move to a true “free float”?  And if so, what is the collateral damage along the way?

2. Will some countries leave the eurozone? (and if they do, it is a big deal for them, but probably not a big deal for the global monetary order, unless it is Italy or France)

3. Will more countries attach to the euro (Iceland?) or to the U.S. dollar (additional parts of Latin America?)

4. How many additional countries will institute capital controls?

For the most part, those questions will be decided at the national level, although for potential euro leavers the nature of the proposed EU alternative (another bailout?) will be significant.

The most likely outcome is that more countries will institute partial capital controls, and in that regard we will move closer to some aspects of the initial Bretton Woods 1.0, in which capital controls were an integral feature.  Capital controls may come to keep a euro peg (already happened in Cyprus), to try to keep domestic jobs (ha, but recall Trump and Carrier), to prevent an imminent explosive capital outflow (China), to strengthen or preserve a banking system, to limit wild currency swings, or simply because governments will try all kinds of policies before admitting they have failed.  Other forms of “capital controls” may come through tax reforms and regulatory barriers designed to keep capital at home.

My best guess on China is that capital outflow pressures eventually will force a free float, but only briefly, and then they will return to capital controls in some form.

So my forecast for the future is much more in the way of capital controls, but without the hegemonic/cooperative international architecture that characterized Bretton Woods 1.0.

At the very least we can ask what they say they would do, and it is not entirely encouraging:

Drawing from literature associating superheroes with altruism, this study examined whether ordinary individuals engaged in altruistic or selfish behavior when they were hypothetically given superpowers. Participants were presented with six superpowers—three positive (healing, invulnerability, and flight) and three negative (fear inducement, psychic persuasion, and poison generation). They indicated their desirability for each power, what they would use it for (social benefit, personal gain, social harm), and listed examples of such uses. Quantitative analyses (n = 285) revealed that 94% of participants wished to possess a superpower, and majority indicated using powers for benefitting themselves than for altruistic purposes. Furthermore, while men wanted positive and negative powers more, women were more likely than men to use such powers for personal and social gain. Qualitative analyses of the uses of the powers (n = 524) resulted in 16 themes of altruistic and selfish behavior. Results were analyzed within Pearce and Amato’s model of helping behavior, which was used to classify altruistic behavior, and adapted to classify selfish behavior. In contrast to how superheroes behave, both sets of analyses revealed that participants would hypothetically use superpowers for selfish rather than altruistic purposes. Limitations and suggestions for future research are outlined.

That is from a new paper by Das-Friebel, et.al., and the pointer is from Rolf Degen. Here is an earlier MR post about what an altruistic and incorruptible Superman should do; I found the question wasn’t so easy to answer.

From Lyman Stone:

…no matter the adjustment, the US is always one of the lowest-concentration countries, along with China, India, Brazil, Germany, and Japan. We have a very diversified metropolitan ecology, as do those countries.

Third, I’ve highlighted Nordic (purple) and Anglo (orange) countries. Notice that all of the Nordics are much more concentrated than the United States, as are all of the Anglo countries! That one was surprising to me, as I expected large countries like Australia and Canada to be much more comparable to the US. As it is, in terms of population concentration, Poland is more American than Canada.

…my most concentrated countries are indeed Mongolia and Peru. Not kidding here. Both results surprised me given that both countries are fairly large and have big rural populations and, in Peru’s case, my impression was that there were a good number of meaningfully sized cities. But it turns out that, in Peru, Lima metro area alone is almost 30% of the population, and then the other cities are pretty small by comparison; and Lima is, of course, also the capital. In Mongolia, Ulaanbaatar metro area is over half of the nation’s population!

So. If you want to know what country is the most city-state-ish, I would have to answer… it’s Mongolia.

Here is the full essay, noting that Singapore is normalized as a polar option at 100% and thus cannot win the competition.  Also scroll down to the interesting graph on “State and Local Taxes Collected as a Share of GDP”: I am surprised to see Sweden come in at number one.  For all the talk of American federalism, we are just at the OECD average and in fact slightly behind Iceland in these rankings.

An interesting theory is that a big victory will make a softer Brexit more likely, since May will no longer have to appease her more eurosceptic backbenchers. And so by 2022, in theory, the most turbulent period of Brexit will have passed, and Labour, or the new centrist ‘Democrat’ Party or whoever is in opposition, are hardly likely to stand on a platform of a European remarriage following the complex divorce. In the meantime another good result for the SNP, which seems likely, will surely give Nicola Sturgeon a mandate for a second referendum. And then there’s Northern Ireland…

That is from Ed West, via Mark Koyama.

I don’t believe in many (any?) conspiracy theories, and if there hasn’t been talk about “the deep state” on MR to date, there is a reason for that.  Still, I have been wondering how one might think about the deep state in public choice terms, even if you have a rather modest view of what it is all about.  Day to day, we mostly get “the shallow state,” so what might the deep state mean?

I can think of a few options:

1. The deep state can selectively blackmail individuals in politics, and for the innocent ones the deep state can fabricate something.  Therefore in equilibrium most politicians shy away from talking about the deep state, even to praise it.  The balance here seems easy enough to understand, but I can’t say I’ve seen evidence for this mechanism.  I suppose if there is any test for it, it is the Trump Administration.

2. The deep state exists to protect the American public (and itself) against very unfavorable policy choices and thus outcomes.  The deep state therefore would move against a very irresponsible president, either by leaks or blackmail or perhaps something more dramatic.  In this model, having a deep state is like buying a put against very unfavorable world-states.  Note that the weaker and harder to coordinate you think is the deep state, the more this is an “out of the money” put, protecting against only the most extreme existential risks.  You might never observe this kind of deep state, though it can be worth a good deal in relatively volatile world states.

Do note that in these games a president will take steps to limit a potential “coup” from the deep state.  One counter-strategy would be to increase the level of background noise, so that the deep state would not be sure whether moving against the president would in fact be justified.

3. The deep state is the Federal Reserve System.  I believe it was Matt Yglesias who first suggested this idea.  And there is indeed a literature on political business cycles.

4. The deep state is active on a day-to-day basis, mostly by manipulating the flow of information to the president and National Security Council and related parties.  Intelligence is more filtered than we outsiders may think.  Presumably the president realizes this sooner or later, and tries to adjust for the filter.  Over time, the filter becomes an increasing distortion, so to keep the chance higher that the president is being fooled by the information flow.

5. The president cultivates the deep state to strengthen his or her bargaining position vis-a-vis Congress or perhaps foreign leaders.  “The deep state won’t let me do that,” or “the deep state will blackmail me,” or…?…cannot be stated outright but perhaps subordinates can hint at such constraints.  Or the president may cultivate the deep state so as to have an option on blackmailing members of Congress, should “the shit hit the fan.”

What else?  And which of those are most plausible?

I thank an MR reader for a useful email on these issues.

I’ll have to put this under the fold, because I can’t say anything without giving away everything… Read More →

France is careening toward a nail-biter presidential election this month that pits a crowded field against anti-E.U. titan Marine Le Pen. But E.U. funds pay her salary, support her assistants, and underwrite the conferences and books she churns out to attack the 28-nation bloc. Key British leaders of the successful Brexit campaign got their financial lifeline from Brussels euros. Elsewhere in Europe, self-identified fascists are paying for rallies to further the future of the “white race” by breaking up the E.U. — all thanks to E.U. money.

…[these parties] get millions because of their heft in elections for the European Parliament, an institution that is short on power but flush with cash.

Here is the Washington Post story by Michael Birnbaum.  I say that Hegel, and works of Continental philosophy that use the word “totalizing,” should be raised in status!

Addendum: Here is more from Farrell and Newman.

In a previous column on India, and how it suffered under colonialism, I mentioned:

If you are looking for the upside of British colonialism, you are more likely to find it in the wealthier and better-treated Singapore or Malaysia.

Why might this have been true?  Part of India’s colonial curse was its high population, which meant the British viewed it as a source of soldiers, and a captive market for goods, rather than an area whose value could be internalized through direct economic development.

When it comes the British history in India, I think of “letting the interior fester” as a big part of the core problem.  Most of India was and still is interior.  You might look at the coastal regions, but given that British policy forced India to accept free trade for British goods, without receiving the same privileges in return, the coastal regions became rent-seeking imperial clusters more than possible rivals to Hong Kong or for that matter Manchester.

Singapore, in contrast, was built around its port, and the British encouraged further developments in that direction, even as early as Raffles in the 1820s.  The city didn’t/doesn’t have much of an interior or for that matter much population (about 1,000 when the British took over).  Keeping the people servile didn’t seem worth the trouble, because they could neither fight nor buy in great numbers.  Instead, you can think of British policy as trying, selfishly, to maximize the value of Singaporean land to the British.  But that wasn’t such a nasty process, as the British Navy made Singapore more focal as a trade center, with a later boost from the opening of the Suez Canal.  Note that as late as the mid-1960s, just before independence, about 20 percent of Singaporean gdp was British defense spending.

Singapore as port and entrepot developed “the entire nation,” all the more as the induced spirit of enterprise later spread to manufacturing.  This in turn gave the territory the possibility of a relatively inclusive and egalitarian future.  Unlike with India, the British rulers never imagined a future where Singapore might threaten them economically, or politically, and so they could just let matters rip.  The British felt, more or less correctly (until the Japanese invasion), that improvements in the value of Singapore would be captured by them.

So it was “keeping an option on captive buyers and fighters” (India) vs. “maximizing the value of the land for Empire” (Singapore).  Both were selfish strategies, but the latter did better for the colony in question.  Hong Kong seems to fit comfortably into this framework, though other cases might be considered (Barbados vs. Guyana?  Ghana vs. Uganda?).

Singapore also benefited from having most of its relevant colonization come later, whereas India had a damaging East India Company period in the 17th and 18th centuries, when imperialism often was more brutal and less sophisticated.

Non-Singaporean Malaya/Malaysia would require a post of its own.  In that case, and also with Singapore more narrowly, an evaluation of British rule cannot be separated from major changes in the exports and also corresponding changes in the ethnic composition of the territory.  The Singaporean national anthem is still a song written in Malay, and by law it must be sung as such.

That is the topic of my latest Bloomberg column, here are a few bits, these are all highly imperfect metrics:

For much of the 18th and early 19th centuries, under British rule, Indian economic performance was mediocre at best. It has been estimated that the yearly agricultural wage was higher in 1810 than in 1946. It’s difficult to prove how much of that decline was because of the British, but it is hardly a ringing endorsement.

And:

Another way to make the historical comparison is to consider which Southeast Asian economy never fell under colonial rule. That would be Thailand, which has a per capita income in the range of $16,300 by World Bank estimates, compared with India’s $6,100. Again, that single comparison is not dispositive, but it hardly favors the British record in India.

And:

Another possible comparison is between British-ruled India and India’s “native states,” namely the numerous territories and principalities where British involvement in direct rule was minimal. To be sure, those regions still were embedded in a broader nexus of British control, and there is no comprehensive database. Nonetheless, historian Jon Wilson, in his recent book “India Conquered: Britain’s Raj and the Chaos of Empire,” offered this assessment: “Economic growth and institutional dynamism occurred in the places that were furthest from the rule of British bureaucrats.” For instance, Tata Steel Ltd. put India’s first modern steel plant in Jamshedpur, a tributary area outside of British rule. Another study found that the independent areas had better performance in terms of education and health care during the post-colonial era.

Maybe you can twist all of those back to neutral, but the data make it surprisingly hard to make a case for British rule in India.

Patrick is co-founder and CEO of Stripe, based in San Francisco.  I recently told a reporter he was one of the five smartest people I have known; he is so smart, in fact, that he asked to interview me rather than vice versa, and so he and I created a new episode of Conversations with Tyler (transcript and podcast at that link, alas no video, and note that was recorded in January so on a few points the timeline may feel off).

We discuss whether macro is underrated, what makes Silicon Valley special, optimal immigration policy, whether Facebook is beneficial for society, whether I might ever vote for Donald Trump, how to start a new religion, Peter Thiel, Brian Eno, where I differ from Thomas Schelling, Michel Houllebecq, how to maintain your composure in an age of Trump, the origins of this blog, how I read so much, why Twitter is underrated, and the benefits of having a diverse monoculture, among many other topics.

Here is one bit:

COLLISON: …You’ve written a lot about how the study of economics has influenced your appreciation for the arts, and for literature, and for food, and all of the rest. You haven’t written as much about the influence in the reverse direction. How has your appreciation for and study of the arts influenced your study of economics? And is this a version of that?

COWEN: This is a version of that. Here would be a simple example: If you think about Renaissance Florence, at its peak, its population, arguably, was between 60,000 and 80,000 people. And there were surrounding areas; you could debate the number. But they had some really quite remarkable achievements that have stood the test of time and lasted, and today have very high market value. Now, in very naive theories of economics, that shouldn’t be possible. People in Renaissance Florence, they didn’t produce a refrigerator that we’re still using or a tech company that we still consult.

But there’s something different about, say, the visual arts, where that was possible, and it was done with small numbers. So there’s something about the inputs to some kinds of production we don’t understand. I would suggest if we’re trying to figure out, like what makes Silicon Valley work, actually, by studying how they did what they did in the Florentine Renaissance is highly important. You learn what are the missing inputs that make for other kinds of miracles.

Ireland and writing would be another example.

…COWEN: And I worry now that people in Ireland hear too much American English, too much English English, and that style of writing, talking, joking, limericks, is becoming somewhat less distinct. Still many wonderful writers from Ireland, but again, it’s like an optimal stock depletion problem, and maybe we’ve pressed on the button a little too hard.

COLLISON: The transaction costs should be higher?

And here is another:

COLLISON: Do we just need a sufficiently obfuscated version of the UBI and then we’re fine?

COWEN: We call it “disability insurance.”

And:

COWEN: Well, I voted on each of these hires. I voted for them. For a lot of them, I was on the hiring committee. Robin Hanson’s a good example. When we hired Robin, he was much older than a typical assistant professor would be. And of course, we don’t practice age discrimination, and neither does anyone else, but . . .

[laughter]

COWEN: Robin was going to have a tough time being hired. And I gave Robin some of my papers to read. He came in. He was a little, actually, obnoxious to me. Though he’s one of the nicest people you’d ever want to meet. He sent me back comments on my papers, that they were all wrong.

[laughter]

COWEN: There was no preliminary politeness: ‘I thought this was interesting, but…’ I thought this was great. So I thought, “We need to hire Robin. Robin is different.” And Robin wrote papers I thought were crazy, but he clearly also was a genius. I pushed very hard to hire Robin, and he made a good impression on a lot of other people. He’s been with us ever since.

COLLISON: Were the papers in fact all wrong?

COWEN: Robin’s criticisms were all good points.

[laughter]

COWEN: But they weren’t entirely wrong.

Self-recommending!

Here is from a new research paper by Christina Starmans, Mark Sheskin, and Paul Bloom:

…despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness. Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality.

As I said in a talk at Harvard Business School a few days ago, “if you hear the word “inequality,” the chance that what follows will be wrong is at least 3/4.”

For the pointer I thank Michelle Dawson.

The subtitle of this new and fascinating volume is How Pessimists, Partisans, and Plutocrats are Transforming the Marketplace of Ideas.  Think of this as an update of Richard Posner’s work on public intellectuals, but explaining where a world of social media and higher income inequality and greater polarization has put us.  Wisely, Drezner does not idealize the milieu of Susan Sontag and the Commentary crowd, but still some things have become worse, due largely to the lack of trusted gatekeepers.  For one thing, current superstar status encourages shortcuts and pandering and the evolution of thoughtful “public intellectuals” into evangelizing “thought leaders.”  On the macro level, we are in an equilibrium where every position is argued, verification in the eyes of the reader is doubtful, and the level of trust keeps falling.  That in turn lowers quality, which causes trust to fall further yet, and that also has feedback onto the kind of superstars that rise and persist.

And yes, individual offenders are named!  (You’ll have to buy the book for that.)

In my conversation with Dan yesterday, we pondered whether a high water mark of sorts, for the quality of public intellectual discussion, might have been reached in the late 1980s (e.g., Fukuyama, Nye, Huntington, Friedman, but just a hypothesis, I am not attributing this view to him).  Ultimately I still prefer the present day, having become addicted to freedom of entry and large audiences and a higher percentage of weirdos on the content side.  Yet the larger audiences (yes, you!) are a mixed blessing, and the desire to pander to them, and to give them a voice on social media, ultimately may lead to lower quality feedback being passed along to elites.  The ongoing polarization and exaggeration of discussion is hard to stop, for instance one of the most famous and highest status public intellectuals covered by Dan — Paul Krugman — only a few days ago on Twitter called Trump a “corrupt Russian puppet.”  Krugman is not even one of the figures Dan criticizes.

Going back to Dan’s book, what he prefers is — to summarize it bluntly — TED talks with rebuttals and referee reports.  I am fine with the idea, but I wonder if it doesn’t just cement in the outcome where all comments and positions are staked out with both a vehemence and a lack of resolution.  And as Dan himself points out in other contexts, criticism itself cements in the superstar status of the targets in most cases, and a reasonable consensus may be as likely to recede as anything else.  Ideally Dan wishes to ease “idea exit” rather than restrict “idea entry,” but I am not sure you can have the former without some version of the latter.

There is a very interesting chapter on how this new world has boosted the relative status of economists amongst the social sciences, for instance relative to political scientists.  The first person observations about Dan’s own career are extensive and fascinating.

My take on all this is to prefer a higher-trust-in-experts equilibrium for its practical properties, yet without believing the trust actually is deserved, giving me again a slight affinity with Strauss.  Is there an equilibrium where a high level of trust can be maintained more or less forever?  Or is it like an optimal resource extraction problem, namely that most kinds of trust end up being cashed in, you just hope it was for some good purpose (public support for the bailouts to avoid another 1929?, to cite another of Dan’s books.)

Two topics I wish were discussed more were a) the corrupting influence of consulting, and b) the unwillingness of many intellectuals to address particular issues at all, rather than bias in what they do say.  Of course in both cases accountability is harder to enforce; on the former there are typically no public records, and on the latter it is rarely the responsibility of any particular individual to speak up (“I will pontificate on all sorts of things, but I don’t work on that topic.”)  The resulting lack of transparent, identifiable violations can make these problems all the more insidious.

Over coffee, or rather mineral water for me, I challenged Dan on the notion that social trust actually has gone down — not in businesses, I would say — and offered contrarian takes on Jared Kushner and the trajectory of American power, maybe you will hear more about those soon.  In the meantime, this is one of the thought-provoking books of the year, most of all for those who seek to better understand the world we are all swimming in.

That is by Ray Fisman and Miriam A. Golden, an excellent book, the subtitle says it all.  And yes it does also cover how to stop or at least limit corruption.